Masco Corporation

Good morning, ladies and gentlemen. Welcome to the MASCO third quarter earnings call. My name is Jamaria, and I will be your operator for today's call. As a reminder, today's conference call is being recorded for replay purposes. To ask a question, please press star, then the number one in your telephone keypad. To withdraw your question, please press the pound key. I will now turn the call over to David Chayka, Vice President, Treasurer and Investor Relations. You may begin.

Thank you, Operator, and good morning. Welcome to Masco Corporation's 2021 third quarter conference call. With me today are Keith Allman, President and CEO of Masco, and John Snevice, Masco's Vice President and Chief Financial Officer. Our third quarter earnings release and the presentation slides that we will refer to today are available on our website under Investor Relations. Following our remarks, we open the call for analyst questions. Please limit yourself to one question with one follow-up. If you can't take your question now, please call me directly at 313-792-5500. Our statements today will include our views about our future performance, which constitute forward-looking statements. These statements are subject to risk and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We've described these risk and uncertainties in our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted, unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations. With that, I now turn the call over to Keith. Thank you, Dave.

Good morning, everyone, and thank you for joining us today. I'm proud of the way our team continues to execute in these dynamic times. In the third quarter, sales increased 11%, our fifth consecutive quarter of double-digit top-line growth. This was against a strong 16% comp from last year. This growth came as we continued to face significant supply chain challenges. Certain raw materials were hard to come by, such as resins, microchips, and even pallets. Freight congestion in ports and lack of trucking capacity contributed to increased delays in shipping and receiving goods, and labor shortages continue to be a challenge. I would like to thank both our employees and our tremendous supplier partners, who together have worked tirelessly to address these challenges. They have kept our plants running and our customers supplied. resulting in outstanding top-line performance. Operating margin for the quarter was 17.5%, as we executed our planned transition to a more normalized level of SG&A expense to support our brands, innovation, and new products. Moving to our segment performance, beginning with plumbing, sales increased 15%, excluding currency. led by exceptional growth in North America and international faucets and showers and our spa business. These results highlight the strength of our plumbing platform diversity across geographies and channels. To support our continued international growth, Hansgrohe recently announced plans to invest in a new manufacturing facility in Serbia. This additional capacity will enable further growth and further strengthen Hansgrohe's capabilities to serve its customers. We plan to invest approximately $100 million in this project over the next three years. In our decorative architectural segment, sales grew 4% against a robust 19% count from the third quarter of 2020. Propate had an exceptional growth of over 45% in the quarter, helping to offset moderating demand in DIY paint. DIY paint declined mid-single digits against a tremendous comp of over 25% in the third quarter of 2020. We continue to see indications of DIY paint demand stabilization, as demand was fairly consistent throughout the quarter. When compared to our third quarter 2019 sales, our DIY paint sales were up over 20%. a clear indication of a re-engaged homeowner and strong home improvement fundamentals. Lastly, Behr Paint was recently recognized as the Home Depot Partner of the Year in the paint department. This recognition was a result of successfully keeping the Home Depot in stock during the DIY surge last year. Our continued investment in our joint effort to grow the Pro Paint category and our commitment to bringing new and innovative products, such as our recently launched Behr Dynasty, to the Home Depot. Each of these has contributed to tremendous growth for both Behr Paint and the Home Depot, and this recognition is a testament to the strength of our partnership. Moving on to capital allocation, we continued our share buyback activity during the quarter by repurchasing 2.2 million shares for $128 million. In addition, we anticipate deploying approximately $150 million in the fourth quarter, bringing our total share repurchases to over $1 billion for the year. Now let me give you an update on what we are experiencing with inflation. The second half of 2021 is largely unfolding as anticipated. We experienced low double-digit inflation in the third quarter, and we expect mid-teens inflation in the fourth quarter. We have taken pricing actions across both segments and expect to achieve price-cost neutrality by year-end. It has been an extremely dynamic year, and our supply chain and commercial teams have done an exceptional job managing through the many challenges. Because of this outstanding execution and continued strong demand for our products, We are maintaining the midpoint of our previous guide and expect to achieve earnings, full year earnings per share in the range of $3.67 to $3.73. Lastly, before I turn the call over to John, we are pleased to share with you that our comprehensive 2020 Corporate Sustainability Report is now available on our website. This report demonstrates our commitment to environmental, social, and governance responsibility. During a year of unparalleled change, our team members remained committed to maintaining our strong reputation for ethical business practices, reducing our environmental impact, and enhancing our DE&I efforts. I'm proud of the hard work we are doing every day to ensure that our employees feel a sense of inclusion, belonging, and support. Our progress in ESG is a priority for our board and our executive leadership team. I hope you will take the time to read more about how our long-term sustainability influences the way we run our business, operate our facilities, and contribute to the community. With that, I'll turn the call over to John for additional details on our third quarter results. John?